No hike in visa costs, INR fall led to strong Q2: Mindtree

The July-September quarter has been satisfying for Mindtree, as the company witnessed strong revenue (dollar) growth for second successive quarter, says CEO and MD Krishnakumar Natarajan. The midcap IT company reported revenue growth of 5.4 percent sequentially (15.6 percent year-on-year) at USD 124 million.

Speaking to CNBC-TV18 post results, Natarajan says the demand environment of the company has improved over the last few months. Positive demand environment coupled with specific intervention has led to the growth being consistently higher in the last two quarters, he adds.
Meanwhile, CFO Rostow Ravanan adds that in Q2 margins went up by approximately 240 bps due to rupee depreciation that gave about 4.5 percent benefit at EBITDA (earnings before interest, taxes, depreciation and ammortisation) level. Also, the company did not increase its visa cost which impacted margims by almost 1 percent. Below is the verbatim transcript of the discussion on CNBC-TV18 Q:How has the quarter been? Can you elaborate your numbers? Natarajan: Certainly, it has been a satisfying quarter, strong revenue growth for second successive quarter. Revenues came in at USD 124 million which is 5.4 percent quarter on quarter growth and a 15.6 percent year on year growth. On a constant currency basis, this is 5.7 percent quarter on quarter growth. The growth got driven because of certain key initiatives which we took in Mindtree.
In the beginning of the year we shared that we are going to be far more focused on a few segments as well as invest in enhancing our front end client facing teams significantly. Also, the demand environment has become lot more positive. The demand environment becoming positive coupled with specific intervention which Mindtree had, has led to the growth being consistently higher in the last two quarters.
What has been more satisfying on Q2 is that it has been a well rounded growth. All our industry segments have shown growth. Leading the pack is our manufacturing retail Consumer Packaged Goods (CPG) group which grew at 8.9 percent quarter on quarter and our travel and transportation group which grew at 7.9 percent.
Among service lines, our infrastructure management practice had a tremendous quarter, they grew 20.5 percent quarter on quarter.
On the geographies, North America had a good quarter, Europe had a stupendous quarter primarily because of two large wins in quarter one, all of which ramped up so Europe had a great quarter.
Overall, be it our industry segments or our service lines it has been a very well rounded growth which in turn reflected on our client, our 5 million customers have moved by 1 to 21. We have a new category which is USD 30 million customers and we have three customers in that range. This quarter we added 9 new customers which is good, while we are also addressing part of the tail which we are dropping.
It has also been a good quarter on people front. Today, we had 12,941 Mindtree mines and added 1,122 mines this quarter. This gross addition is probably highest in the last 4-5 quarters.
Attrition has been under control. We probably have one of the best retention rates now. Attrition is down to 11.9 percent on the last 12 months trailing basis which when compared with last year, is about 16.3 percent. Volume growth has been good at 5.8 percent and Q1 also had a strong volume growth of 4.1 percent. It has been satisfying to have two continuous quarters of strong volume growth.
Also, cash flows have been good at 23 million where the efficiency of converting our EBITDA to cash was almost in excess of 85 percent. Overall, if one looks at the various parameters which indicate the health and how the outlook is, it has been satisfying on all these counts. Q: Margin wise you have seen significant uptick this quarter, do you see that sustainable? Can we expect the same thing in Q3 & Q4 as well or with Q3 & Q4 traditionally being slightly soft quarters for the IT industry - do you see that impacting the margins as well? Any other headwinds you foresee in margins? Ravanan: In this quarter margins went up by approximately 240 bps and that came as a result of some benefits and some cost increases. The benefits were in the form of currency depreciation that gave us about 4.5 percent benefit in this quarter at EBITDA level and we did not have cost increases on visa which is approximately 1 percent impact which we had in Q2.